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Saracen Mineral Holdings Ltd – Quarterly Activities Report

Jordan Baird

Jordan Baird is the head ASR Wealth Advisers client services desk and has been with the organisation since 2017. He first started investing in his early years. While he believes that investors should leave no stone unturned he has a particular interest in trading based on broad macroeconomic trends along with specific analysis of innovative up-and-coming companies.

Saracen Mineral Holdings Ltd (ASX: SAR) is an Australian gold miner. Saracen has two main projects in Western Australia. These include the Carosue Dam Operation and the Thunderbox Operation. Saracen has a market capitalisation of A$2.81 billion.

Saracen Minerals - report

What are the main points of the Quarterly Activities Report?

  • Total gold production for the September 2019 quarter is 96,324oz.

  • All-in Sustaining Costs (ASIC) for the September 2019 quarter is A$964/oz, down from FY20 guidance of A$1025 – A$1075/oz.

  • Gold production for the September 2019 quarter at Carosue Dam is 50,590oz, up 10% from the previous quarter.

  • Gold production for the September 2019 quarter at Thunderbox is 45,735oz, up 5% from the previous quarter.

  • Ore stockpiles for the September 2019 quarter is 139,642oz, up 48% from the previous quarter.

  • Cash and equivalents of A$196.1 million, up 27% from the previous quarter.

What are the main drivers of this result?

Carosue Dam

Gold production at Carosue Dam was strong with a 10% increase in gold production compared with the previous quarter. Additionally, mine operating cash flow for the September quarter was A$30.6 million. This result is due to Dervish continuing to ramp up and with commercial production declared early in the quarter, Karari –Dervish will be treated as one mine going forward.

Thunderbox

Gold production at the Thunderbox operation is slightly up by 5 per cent compared with the previous quarter. The important point to note is that ASIC for the quarter was A$682/oz, this is down around 24% from the previous quarter. This is positive for the mine, as production is slightly up, while costs are down substantially.

What is the outlook for Saracen?

The outlook for Saracen is dependent on the global outlook for gold.

The spot price of gold has slightly dropped in the last few weeks. This is in light of a potential new US-China trade deal (11 October Trump announced that China and the US had reached a tentative agreement for the first phase of a trade deal) and a new potential Brexit deal. If these deals are reached, global economic and political concerns may ease, causing gold not to be as favourable, as it has been in the last number of months. Although, if these global concerns do not ease, gold is expected to perform well continually.

Full-year guidance of 350 -370,000oz at an AISC of A$1,025 -1,075/oz is maintained.

Saracen management notes Saracen’s balance sheet continues to strengthen with available funding now in excess of A$346 million (cash and bullion A$154m, liquid investments of A$42m, undrawn debt facility A$150m) plus operating cash flows and ore stockpiles.

What is the market reaction?

The initial market reaction to Saracen production update is positive Saracen share price is up around 4% and is currently trading at around A$3.495 (2.00 pm, 22 October). Saracen trades on a P/E ratio in the high twenties and an annual dividend yield of 3 per cent.

 


 

Disclaimer:

This article has been prepared by the Australian Stock Report Pty Ltd (AFSL: 301 682. ABN: 94 106 863 978)

(“ASR”). ASR is part of Amalgamated Australian Investment Group Limited (AAIG) (ABN: 81 140 208 288 Level 13, 130 Pitt Street, Sydney NSW 2000).

This article is provided for informational purpose only and does not purport to contain all matters relevant to any particular investment or financial instrument. Any market commentary in this communication is not intended to constitute “research” as defined by applicable regulations. Whilst information published on or accessed via this website is believed to be reliable, as far as permitted by law, we make no representations as to its ongoing availability, accuracy or completeness. Any quotes or prices used herein are current at the time of preparation. This document and its contents are proprietary information and products of our firm and may not be reproduced or otherwise disseminated in whole or in part without our written consent unless required to by judicial or administrative proceeding. The ultimate decision to proceed with any transaction rests solely with you. We are not acting as your advisor in relation to any information contained herein. Any projections are estimates only and may not be realised in the future.

ASR has no position in any of the stocks mentioned.

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